Perhaps you haven’t heard, but a new payroll/wage tax will be taking effect at the beginning of the year. This tax is on behalf of the Long-Term Services and Supports (LTSS) Trust Commission, established through House Bill 1087 and signed into law May 2019. Their aim is to gain alternative funding for long-term care access by creation of an insurance benefit through a payroll premium. Before discussing the new tax, let’s talk about how we got here.
Washington is the first state in the nation to pass this tax into law, though certainly not the only state looking to do so. New York is also looking to pass a .3% payroll tax through their Well-Being Insurance for Seniors at Home (WISH) Act. Meanwhile, Oregon passed a bill (SB703A) directing the Dept of Human Services to conduct a study on cost of long-term care to better understand how Medicaid does or does not meet the cost.
Current costs for assisted living facilities are $120/day or $3,628/month. That comes out to roughly $45,000 annually for a 1-bedroom accommodation. Nursing homes and facilities offering care for patients with an intellectual disability (such as dementia) can run as high as $5,600/month, meaning long-term care could cost anywhere from $40,000 – $60,000 annually per individual. That amount is projected to increase at a 3% growth rate, so by 2050, it would cost around $148,000 per year, and by 2070, $269,000.
But what about Medicaid? Medicaid is currently 6% of the state budget (expected to increase to 12% in the next 20 years) and pays approximately $54,00 for health expenses. Of that, 20% is spent on long-term care facilities with the remainder going toward home and personal care. Medicaid also has strict qualifications for assistance, and even if eligible, could still recoup costs after death from the person’s estate and/or family. Many must pay for these institutions privately through reverse mortgages, annuities, trusts, and income or savings. There are rider policies that are sold with life insurances meant to cover these expenses; however, premiums often are expensive and cannot be purchased unless specific requirements are met (such as being over the age of 50).
Life expectancy in the US is an average of 84 years. Currently 52% of residents in long-term care facilities are above the age of 85. According to the recent census, the oldest of the boomer generation will be turning 74 next year, and all of them will reach the age of 65 by 2030. At that time, older adults will outnumber children (under 18), leading to an increasing need for caregiver services.
The Washington Cares Fundlooks to alleviate costs through a payroll tax — beginning January 1, 2022 — of .58%, or $0.58 for every $100. The average Washington salary is $52,000 gross annually. With this tax, a person earning $50,000 would pay $300/year (about $25/month; check yours with the calculator on the state website). This amount is placed into a trust account overseen by the LTSS and would be available to Washington residents beginning in 2025. To be permanently eligible for benefits, a person must have paid within 10 years within their life (5 consecutively) while being employed more than 500 hours annually (and over the age of 18).
For example, if an individual pays 5 years consecutively, then at the 10-year mark, they will be eligible for benefits any time after that. There is a possibility of being eligible temporarily if you are close to retirement by allowing individuals to pay in for a limited time frame (minimum of 3 years), and then apply for assistance within the same amount of time after retirement. For example, if you contribute 3 years to the fund, you can then apply for benefits within 3 years of retiring (6 years total). Those exempted from this tax include federal employees, self-insured, and casual laborers (or part-time workers). You must pay into the Washington Cares Fund in order to receive the benefits. To be eligible, you must be unable to do two daily tasks (such as bathing, dressing, eating, etc.) or need that care as provided in a setting (such as a facility or in-home). Applications will be handled through the Department of Social and Health Services, very similarly to how the process is for the Family and Medical Leave Act.
Benefits from the Washington Cares Fund are only available to Washington residents. If you work in Washington and live out of state, you will pay the tax, but not be able to receive benefits. If you work the allotted time, and retire in another state, the funds are not transferable, and you will not be eligible to use them. The benefits from the Washington Cares Fund are projected to last to 2070 to ease the burden on Medicaid and facilities, and will pay up to $100/day or $36,500 for life.
The Washington Cares Fund only allows a person to request an exemption from the tax once, and, if granted, would not allow them to opt back in for the remainder of their life. In order to be exempted beginning January 1, 2022, it is required that a person have alternative long-term care insurance by November 1, 2021. The Employment Security Department will only accept applications for exemption through December 31, 2022. Some life insurance policies include long-term care riders. These are different from long-term disability, accelerated death benefits, and critical illness, which are not allowable exemptions from the Washington Cares Fund. Almost no insurance companies are accepting applications from Washington residents until after November 1 (the deadline to be exempted), and those that will take applications currently are only accepting applicants 50 years of age or older.
You can find more information about The Washington Cares Fund at wacaresfund.wa.gov. Additionally, the insurance commissioner’s website has a list of approved insurance companies that offer life insurance with long-term care riders, and those that offer long-term care insurance separately. For questions about the fund, emails can be sent to firstname.lastname@example.org.
If you’d like your voice to be heard, send letters to your regional representatives.
For more information on long-term care insurance, visit: https://www.insurance.wa.gov/sites/default/files/documents/long-term-care-guide_3.pdf
Stephanie is a Law & Justice Major, passionate UW fan, pre-COVID concert fanatic, novice poet, and staunch advocate for social transformation.
[You can find more information about The Washington Cares Fund at wacaresfund.wa.gov.]
Photo by Dominik Lange on Unsplash